Online banks offer flexibility and affordability that many brick-and-mortar banks cannot.
With many online banks available, it can be hard to narrow down your options to one that suits your needs. Our guide to the best online banks helps you find a virtual bank that works for you.
Below, we talk about what an online bank is and what it has to offer compared to traditional banks.
Here is our list of 7 best online banks to choose from in 2021.
Our Online Bank Recommendations
We’ve researched the best virtual banks and come up with this list of seven online institutions. Each one has key features that make it stand out from the other options. None of our recommendations have monthly fees for checking accounts.
Alliant Credit Union: Alliant offers high-interest accounts for minors and normal checking and savings accounts for adults. Alliant has access to over 80,000 ATMs. This online bank is a great option to build up savings for your child.
Ally Bank: Ally has no-fee checking accounts with a 0.1% interest rate that increases to 0.5% when you reach $15,000 deposited. Ally Bank also offers money market accounts, CDs and IRAs.
Capital One: Capital One online bank has special overdraft protection features not found elsewhere. Their banking app is one of the highest rated mobile apps and easiest to use.
Charles Schwab: Charles Schwab is a full-service online bank. It offers brokerage accounts and loan services. This bank’s unlimited ATM rebates are a favorite for travelers.
Chime: Chime virtual bank excels in its online offerings. With Chime, users can receive direct deposits two days faster than normal. Members can also set up the automatic savings feature that rounds up purchases and deposits the extra cash in your savings.
First Foundation Bank: First Foundation offers one of the highest interest rates for savings accounts at 1.2%. To get this rate, you need to have $1,000 in the account. Once you get this rate, however, it does not go away. First Foundation Bank has physical locations in California, Nevada and Hawaii.
Simple: Simple provides extensive tools for budgeting. This virtual bank lets you set savings goals and tells you how much you can spend without interrupting those goals. Plus, they offer savings accounts with competitive interest rates.
What is an Online Bank?
An online bank is a financial institution that does not operate through physical branches. They might have a few banks you can visit in person, but most online banks operate exclusively over the web..
Because online banks have few physical locations, a virtual bank saves a lot of money on overhead costs. Online banks can then pass on these savings in a variety of ways.
Pros of Online Banking
An online bank offers unmatched flexibility in your banking.
Most online banks don’t charge to open accounts. Online banks also offer the flexibility to manage accounts wherever and whenever internet is available. You can transfer funds, deposit checks (virtually) and open or close accounts as you wish.
On top of this, the best online banks offer higher interest rates than you cannot usually find at local banks. This gives you greater earnings on your savings.
If you’re a cost-conscious budgeter, an online bank allows you to automate transfers and payments seamlessly. In some cases, moving money from one account to another is faster, with cash accessibility as soon as it is placed into an account. This cash fluidity makes life easier in general.
Other great features you can find with online banks:
- Unlimited checking accounts
- 24/7 customer service
- Robust apps and online tools
Cons of Online Banking
Without a physical bank building, depositing or withdrawing cash, cashing checks and handling cash in any manner becomes more difficult.
While many people operate with credit and debit cards, those that work with cash may need to have an account with a traditional bank with brick-and-mortar locations to access these features. Those that don’t operate with cash can easily adopt a digital way of handling their finances.
Those that choose online banks may also have trouble finding an ATM machine within their network to avoid paying ATM fees. Many online banks offer ATM rebates that mitigate or eliminate the costs of ATM fees all together.
Key features that many online bank users may miss out on include:
- Cash Loans
- Large Cash Withdrawals
- Face-to-face service
- Business services
Combining the Best of Both Worlds
You don’t have to choose between virtual or online banks.
Many people have accounts in both a virtual bank and a traditional bank, granting full access to the benefits both options offer. In some cases, a local credit union can serve as your physical bank, bridging the gap in services. Credit unions typically have lower fees than national banking institutions, making them a good in-between choice.
Use the advice in this article to help you choose an online bank that works for you.
